The Value of Freight Economy in Minnesota

Lee Munnich and Tom Horan | September 20, 2013

Study Motivations

• MAP-21 emphasis

• Confluence of interest in freight and freight rail

– Organizations leading current or recent related

studies: MnDOT/Met Council, Ramsey Co.

Regional Railroad Authority, St. Paul Port

Authority, Mid-America Freight Coalition (MAFC)

• Need to better understand the relationship

between freight and economic

competitiveness

Study Objectives

• Research

– Explore means for understanding and enhancing the value of freight transportation, particularly freight rail, to Minnesota’s economy, local communities and surrounding region

• Outreach

– Engage stakeholders as the research program is designed and implemented by sharing its conclusions broadly in multiple venues

Study Methods

• Economic and Related GIS Data Analysis – Industry cluster and GSP shift-share analysis

• National and Regional Expert Interviews – Class 1 and shortline railroads; federal, state

and local policymakers; economic development officials, among others

• Report Reviews and Synthesis – Various sources: NCFRP, SHRP, economic

research, Minnesota state freight and rail plans

– Consulting concurrent studies to inform/align

Interim Findings

INTERIM FINDING 1

Freight rail is important to the

economic competitiveness of

Minnesota and plays a vital

role in movement of key

Minnesota industries

Interim Finding 1

“Minnesota is right at the crosshairs

of the rail system, both north to

south and east to west. It is not only

an important infrastructure for

Minnesota, but for the country”

-Railroad Representative

Interim Finding 1 Minnesota’s Gross State

Product (GSP) growth has been

stronger than the national

average each year during the

economic recovery in several

key industries dependent on rail:

• Agriculture grew 9.4% a year in MN

compared to 3.1% for U.S. from

2007 to 2012

• Mining grew 16.7% a year in MN

compared to 2.3% for U.S. from

2007 to 2012

• Manufacturing grew 4.3% a year in

MN compared to 1.9% for U.S. from

2007 to 2012

U.S. and Minnesota gross domestic product growth,

1997 to 2012

Source: U.S. Bureau of Economic Analysis

Interim Finding 1

Minnesota’s GDP

share specialization

in rail transportation

is nearly 40% higher

than the national

average

Rail Related Industries GSP Concentration

Source: U.S. Bureau of Economic Analysis

Agricultural Products Employment Concentration

Source: U.S. Economic Development Administration Cluster Mapping data

Forest Products Employment Concentration

Heavy Machinery Employment Concentration

Metal Mining Employment Concentration

Processed Food Employment Concentration

Production Technology Employment Concentration

Publishing and Printing Employment Concentration

INTERIM FINDING 2

The partnership between Class 1 and Shortline

railroads is valuable and essential for the economic

growth of Greater Minnesota

Interim Finding 2

“A major goal of shortline railroads is to revitalize the

communities which they serve”

-Shortline Railroad Rep.

• Shortlines generally serve a limited number of customers—in some cases only one

– Rural customers include grain and flour mills, gravel pits, and iron ore mines, which often can only be economically served by rail

• Example: Minnesota Prairie Line

– Public investment of $6 million kept line from abandonment– not only securing the future of businesses along the line but allowing two to expand in the small towns of Arlington and Winthrop, MN

Interim Finding 2

Example: Minnesota Prairie Line – Public investment of $6 million kept line from

abandonment– not only securing the future of businesses along the line but allowing two to expand in the small towns of Arlington and Winthrop, MN

Freight StoryMap

INTERIM FINDING 3

Freight rail and its infrastructure is under

recognized in comparison to other modes of transportation

Interim Finding 3

“If all passenger rail stopped tomorrow, it’s not clear that it would be much of an impact, except some

inconvenience. If all freight rail stopped tomorrow, the economy

would be in dire straits” -Federal Transportation Administrator

Interim Finding 3

• Freight rail delivers a public good—a low cost, long distance transportation option for many key American resources and commodities—with little public investment

• However, roads, funded almost entirely by public dollars, are generally the only mode of transportation with widespread understanding of their importance

INTERIM FINDING 4

Intermodal transportation policy represents the next

important area of progress for policymakers and industry

professionals

Interim Finding 4

“The intermodal system is critical in

Minnesota. While truck movements

have certainly grown, we continue to

see major reliance on the rail system

for key commodities and even, where

possible, on the barge system”

-Minnesota Logistics Expert

Interim Finding 4

• Industrial facilities: – Provide good paying jobs, increase the local tax base, and

contribute to the local service economy

• Communities see: – Blighted, gray, underutilized area

– Commercial redevelopment potential

• Balancing residential and commercial uses with the economically important industrial uses is a challenge faced by cities across Minnesota and the country – Example: St. Paul ICIC Study

Photo Source: http://www.partnerswarehouse.com/Portals/5/images/rail%20cars%20%20o%20compressed.jpg

INTERIM FINDING 5

Public perception of freight

rail’s value generally lags

behind its actual importance

to the economy and

communities which it serves

Interim Finding 5

“There was a time when rail was really a good thing, in the fact that

it brought goods and commodities and whatnot. As

with a lot of things, I think we're out of touch with a lot of the ways

that our society runs” -State Economic Development Official

Interim Finding 5

• Public perception often leans

against freight rail due to its

behind-the-scenes impact but

visible nuisances – i.e. noise and grade crossing delays

• Negatives trickle up to local

officials who hear complaints

from citizens – Creates a disconnect between those

officials, higher-up policymakers and

rail representatives who understand

how rail is enhancing the economy

– Example: St Paul Port Authority

Photo Source: http://farm9.staticflickr.com/8232/8598700795_ebf94e9287_z.jpg

Next Steps

• Recommendations Development

– Policy, Partners, Communities, Public

– Connect with MAP-21

• Outreach

– Draft Recommendations Sharing

– Study Conclusion Event

Thank You!

• Questions? Comments? Please contact

us:

– Lee Munnich, Senior Fellow

• Phone: 612-625-7357

• Email: munni001@umn.edu

– Tom Horan, Visiting Scholar

• Phone: 909-607-9302

• Email: tom.horan@cgu.edu